Full Press Release Details
Sundial Reports Second Quarter 2020 Financial
CALGARY, AB, Aug. 13, 2020 /CNW/ - Sundial
Growers Inc. (NASDAQ: SNDL) ("Sundial" or the "Company") reported its financial and operational results for
the second quarter ended June 30, 2020. All financial information in this press release is reported in millions of Canadian dollars,
unless otherwise indicated.
All references to cannabis operations refer
to the continuing operations of the Company. With the disposition of Bridge Farm on June 5, 2020, the ornamental flower operations
have been represented as discontinued operations.
SECOND QUARTER 2020 FINANCIAL AND OPERATIONAL
Net cannabis revenue for the second quarter of 2020 was
$20.2 million, an increase of 44% over the first quarter of 2020
Branded product average gross selling price for the quarter
increased by 11% to $5.67 per gram equivalent from $5.11 per gram equivalent in the previous quarter
Combined Sales, Marketing, General and Administration costs
from cannabis operations decreased by 33% over the previous quarter to $8.3 million from $12.4 million
Branded net cannabis sales increased to 69% of total cannabis
sales from 54% in the previous quarter
Dried bulk cannabis cost of goods sold per gram was $1.34
in the second quarter as compared to $1.21 in the previous quarter
Net loss from cannabis operations was $31.6 million
in the second quarter; adjusted EBITDA loss from cannabis operations decreased by 67% over the previous quarter to $3.9 million
Supply chain capabilities were improved with On Time In
Full (OTIF) product delivery metrics above 90%
An extensive financial restructuring was executed resulting
in reduced leverage and improved liquidity, including the sale of the Bridge Farm Group for $90 million
An inventory impairment provision of $13.4 million was
recorded on dried cannabis and cannabis extracts
"August 1 marks Sundial's one-year anniversary
as a public company. In this limited timeframe, our team has executed on delivering branded product offerings to customers and
captured market share with a narrow focus in the inhalables market," said Zach George, Chief Executive Officer of Sundial.
"While we are pleased to be one of a small group of Canadian LP's able to post quarterly revenues greater than $20 million,
we remain focused on the intense competitive landscape and the need to gain greater scale to reach sustainable profitability.
We have made good progress in streamlining our business over the past six months, having eliminated non-core initiatives, reduced
costs, and improved operating efficiencies. During this time, we also added new product offerings and reinforced our
reputation as a high-quality cannabis producer. We still have significant work to do as we look to deliver on innovation,
improve capacity utilization, and reduce our cost of goods sold. These initiatives, along with continued strong consumer demand and
increased sales levels to date in 2020, should position us well for the balance of the year."
"While the COVID-19 pandemic continues
to bring many challenges, we are grateful for the dedication and commitment our employees have shown," added Mr. George. "Our
employees' health and safety continue to be the priority for Sundial and we continue to focus on our stringent prevention measures
to limit the potential spread of the virus within our organization."
The Company continues to monitor daily developments
in the COVID-19 pandemic and actions taken by the government authorities. In accordance with the guidance of provincial and
federal health officials to limit the risk and transmission of COVID-19, Sundial has implemented mandatory self-quarantine
policies, travel restrictions, enhanced cleaning and sanitation processes and frequency, and social distancing measures. Sundial believes
that it can maintain safe operations with these pandemic-related procedures and protocols in place. The Company did not
experience a material impact on its production and processing activities in the second quarter related to COVID-19.
STRATEGIC AND ORGANIZATIONAL UPDATE
Sundial's overall strategy is to build sustainable,
long-term shareholder value by reducing leverage, improving liquidity and cost of capital while optimizing the capacity and capabilities
of its production facilities.
To achieve this, Sundial will continue its
Meeting evolving consumer preferences by being a consumer-centric
organization with data-driven consumer insights and analytics
Delivering industry-leading, best-in-class brands and products
with a focus on inhalables and potency levels of THC greater than 18%
Innovating on genetics, products and processes and continuing
to invest in the Company's brands
Driving quality in all aspects of the Company's operation
and delivering products that consumers want, when and where they want them
Continuing to improve cost discipline and maintaining a
variable cost structure and flexible production capacity to adapt to industry dynamics
Sundial expects 2020 to be a transition year
as the Company has reset its strategic focus, streamlined its organizational structure, and implemented a comprehensive operational
and supply chain productivity optimization program.
STRATEGIC ALTERNATIVES REVIEW INITIATED
Following a review of its business, Sundial
recently initiated and continues a process to explore strategic alternatives focused on maximizing shareholder value. Sundial's
board of directors ("Board") has authorized management and its external advisors to consider a broader range of strategic
alternatives, including a potential sale of the Company, merger or other business combination, investments in other Canadian cannabis
companies, including dispensaries and other retail outlets, dispositions of discrete brands and related assets, optimizing its
assets, including the potential sale of its Rocky View and Merritt facilities, selling limited quantities of inventory at or below
cost and entering into long-term supply agreements with other licensed producers, licensing or other strategic transactions involving
the Company, or any combination of the foregoing. Sundial has engaged a financial advisor to assist with these efforts.
There can be no assurance that the exploration
of strategic alternatives will result in any transaction or specific course of action. The Company has not set a timetable for
the conclusion of its review of strategic alternatives and does not intend to disclose developments with respect to the exploration
of strategic alternatives unless and until its Board has approved a specific transaction or course of action or the Company has
otherwise determined that further disclosure is appropriate or required by law.
SECOND QUARTER 2020 KEY FINANCIAL METRICS
| Gross Revenue | Net Revenue | Gross Margin (1) | Net Loss | Adj. EBITDA | |
| Reported | 24,341 | 20,194 | 2,858 | (31,560) | (3,898) |
| % Change Q1 2020 | 47% | 44% | 473% | 18% | 67% |
| % Change Q2 2019 | 20% | 5% | -68% | -156% | -757% |
| (1) | Gross margin before inventory impairment and fair value adjustments |
SECOND QUARTER 2020 BUSINESS & OPERATIONAL
Gross margin from cannabis operations before inventory impairment and fair value adjustments for the three months ended June 30,
2020 was $2.9 million compared to $0.5 million for the three months ended March 31, 2020. The increase of $2.4 million was mainly
due to increased revenue, efficiency gains as realized by decreased cost of goods sold and incremental product mix.
Average gross selling price per gram equivalent of branded products was $5.67 per gram in the second quarter of 2020, including
net provisions, compared to $5.11 per gram in the prior quarter. The change in average gross selling price was primarily
due to an increase in vape sales. Average gross selling prices for unbranded flower in the second quarter were $2.82 per gram up
from $2.74 per gram in the previous quarter despite competitive pressures in the wholesale market as a result of industry-wide
increased inventory levels.
Sundial remains focused on delivering industry-leading, best-in-class products with a focus on inhalable products, including
flower, pre-rolls and vape cartridges. Gross revenue from vape cartridge sales was $6.3 million in the second quarter of
2020 representing a 44% increase from the previous quarter. Sundial continues to build on strong consumer adoption with its vape
portfolio and continues to diversify its product mix with plans for the addition of solventless extracts by the fourth quarter
The Company sold 5,997 kilogram equivalents of cannabis in the second quarter of 2020, a 35% increase over the previous quarter
sales of 4,437 kilogram equivalents.
The Company has seen commercial success in the second quarter of 2020 with a significant increase of branded sales. This success
can be attributed to its strong recreational launch in Quebec, supply chain optimization and continued market share penetration
within the inhalable products segment nationally. Branded net cannabis sales in the second quarter of 2020 were $14.0 million
compared to $7.6 million in the first quarter of 2020, an increase of 84%, supporting Sundial's strategy to focus on increased